BRASILIA, Sept 15 (Reuters) - Brazil's economic activity

declined more than expected in July, marking a third consecutive

monthly decline, a central bank index showed on Monday,

highlighting a slowdown in Latin America's largest economy as

borrowing costs remain high.

The IBC-Br index, a proxy for gross domestic product, fell

0.5% in July from the previous month on a seasonally adjusted

basis, compared with the 0.2% drop expected in a Reuters poll.

The index incorporates central bank estimates for farming,

industry and services, along with production-related taxes, all

of which posted negative readings in the month.

The index rose 3.5% in the 12 months through July, according

to non-seasonally adjusted data.

Brazil's benchmark Selic rate stands at 15%, near a

two-decade high, as policymakers try to rein in annual inflation

that has consistently exceeded the 3% target.

The central bank will announce its next policy decision on

Wednesday, with markets widely expecting rates to remain

unchanged, in line with earlier guidance.

On Friday, the finance ministry cut its 2025 GDP growth

forecast to 2.3% from 2.5%, citing weaker-than-expected

second-quarter performance and pressure from high interest

rates.